Question

On April 29, 2015, Auk Corporation acquires 100% of the outstanding stock of Amazon Corporation (E & P of $750,000) for $1.2 million. Amazon has assets with a fair market value of $1.4 million (basis of $800,000), no liabilities, and no loss or tax credit carryovers. Amazon Corporation's tax rate is 34%. Auk Corporation files a timely § 338 election. Assume that both the aggregate deemed sale price (ADSP) and adjusted grossed-up basis (AGUB) are $1.4 million.
a. What are the tax consequences of the § 338 election to Amazon Corporation and to Auk Corporation?
b. Assume that Amazon Corporation is liquidated immediately following the § 338 election. What are the tax consequences of the liquidation to Amazon Corporation and to Auk Corporation?